Pactiv Reports Steady Second Quarter Results
July 23, 2007 - For the quarter ended June 30, 2007, Pactiv Corp. today announced that income from continuing operations was $69 million, or $0.52 per share, compared with $69 million, or $0.49 per share, in 2006. Sales rose 10 percent to $828 million from $750 million. Results included $43 million in sales from the acquisition of Prairie Packaging that closed in June.
"Our performance in the quarter was strong, particularly against record EPS in last year's second quarter and in an environment that has seen steadily increasing raw material costs since early 2007. Our price increase in the Foodservice/Food Packaging segment was effective late in the quarter, and we saw improving volume trends in both business segments. We closed on the Prairie acquisition in June and are pleased with the integration progress, as well as the opportunities to grow the Prairie business going forward," said Richard L. Wambold, Pactiv's chairman and chief executive officer.
Gross margin was 29.0 percent compared with 31.9 percent last year. The decline primarily reflected unfavorable spread (the difference between selling prices and raw material costs) due to higher polystyrene and aluminum costs. Operating margin was 15.5 percent compared with 16.5 percent last year.
Free cash flow in the quarter was $29 million compared with $65 million last year. The decline was the result of higher accounts receivable due to greater sales late in the quarter, as well as higher capital expenditures.
For the six-month period, income from continuing operations was $126 million, or $0.94 per share, compared with $120 million, or $0.84 per share, last year. Sales of $1.51 billion rose 5 percent from $1.43 billion. Gross margin was 29.6 percent compared with 30.6 percent, and operating margin was 15.3 percent compared with 15.5 percent. Year-to-date free cash flow was $47 million compared with $93 million last year.
BUSINESS SEGMENT RESULTS
Hefty® Consumer Products
Sales of $308 million rose 11 percent from $277 million, and included $19 million from the Prairie Packaging acquisition. Volume rose 4 percent in the base business, reflecting strength in food bags, waste bags, and tableware.
Operating income was $58 million versus $57 million last year as higher volume and lower advertising and promotion expense offset unfavorable spread. Operating margin was 18.8 percent compared with 20.6 percent last year.
For the six-month period, sales of $555 million rose 7 percent from $519 million. Operating income was $112 million compared with $99 million last year. Operating margin was 20.2 percent compared with 19.1 percent.
Sales of $520 million rose 10 percent from $473 million last year. The Prairie Packaging acquisition added $24 million to sales in this segment. Volume in the base business rose 1 percent. Excluding a continuing decline in foam insulation product sales related to the soft home construction market, volume in the base business rose 2 percent.
Operating income was $68 million compared with $70 million last year as higher raw material costs offset favorable pricing. Operating margin was 13.1 percent compared with 14.8 percent last year.
For the six-month period, sales of $950 million rose 4 percent compared with $911 million last year. Operating income was $118 million compared with $127 million in 2006. Operating margin was 12.4 percent compared with 13.9 percent.
The following outlook includes the Prairie Packaging acquisition. The Company expects 2007 sales to grow 11 percent to 13 percent. The third quarter earnings per share outlook is a range of $0.41 to $0.45. The full year earnings per share outlook is a range of $1.82 to $1.92. The earnings per share accretion from Prairie Packaging included in the full year outlook is $0.02 to $0.04, in line with the Company's original expectation.
For the full year, SG&A expense is estimated to be approximately $300 million. The 2007 tax rate is expected to be approximately 36 percent. Free cash flow from continuing operations for 2007 is anticipated to be in a range of $200 million to $225 million. Capital expenditures are expected to be approximately $140 million. Depreciation and amortization expense will be approximately $165 million.
SOURCE: Pactiv Corp.